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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 15:05 
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The end of the year was nuts!
....
I’ll keep you guys posted, but we are currently rewriting our aircraft purchase agreements to better protect our buyers in a seller’s market.


This kinda implies that Sellers are evil. And because most Buyers are also Sellers (or eventually will be), how can one explain the bi-polar nature here?

Best,

Tom


So many buyers a seller renegs on a binding offer and returns deposit? Takes higher offer from other buyer and leaves buyer high and dry

There are ways to protect for this in the purchase agreement language that should not be required but in a hot sellers market may be necessitated

I dealt with a seller that would keep moving the goal post, over 18 months later he is still stuck with the plane and now hiring a broker to get his magic number, good luck!

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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 17:06 
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With the help of an experienced BT member have been following the US market for around a couple of weeks. Obviously a very small window but some data can be offered up.

The market set is V-tail model advertised for sale, S35 through V35B. The original production run for these models was slightly over 3,000, of which a small proportion were TC variants. A proportion will have been exported, and through accidents or lack of care, a further proportion will have been permanently retired. Interestingly, some examples are offered for sale, where the accident record suggests they may have been an insurance write off at some point in their history. This may attest to the build and intrinsic value of the type.

My hypothesis is that around 2300 normally aspirated S35 through V35B remain operational in the US. Possibly this is a conservative number.

There is currently around 30-35 of these IO-520 original variants advertised, or around 1.5% of the estimated fleet. Around 3 to 5 appear to be under offer, or around 0.2% of the fleet. Not surprisingly these examples appear to have realistic offer values of around 85%-100% fair value. Clearly this being quite subjective.

Around a third of the variants on offer have airframe history (euphemism for damage), which arguably is not representative of the fleet. i.e. damage history airframes may be over represented.

This is the depth of winter, a seasonal low point in a complicated season, but it gives a snapshot.

A good quality, well maintained and currently operational airframe offered at fair value does seem to get a buyer in a few weeks. However, a monthly turnover of around 0.2% of the fleet may not be that representative. I would expect around 5% fleet annual turnover, or around 10-12 airframes a month in the higher season, which implies around 20 new to the market airframes every month.

In short there appears to be a reasonably healthy opportunity set, with around a dozen viable examples on offer that don’t get snapped up, and it might not be unrealistic that around a dozen new examples will be offered next month.


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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 17:08 
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Username Protected wrote:
The end of the year was nuts!
....
I’ll keep you guys posted, but we are currently rewriting our aircraft purchase agreements to better protect our buyers in a seller’s market.


This kinda implies that Sellers are evil. And because most Buyers are also Sellers (or eventually will be), how can one explain the bi-polar nature here?

Best,

Tom


Not to imply that seller's are evil at all. It's about having strength in negotiations, in the past we weren't too concerned about sellers backing out during or after prebuy, they wanted the airplane sold and were happy to have a buyer. Now things have shifted...

IN THE TURBOPROP AND JET WORLD

and seller's may have two or three back-up buyers that are ready to buy the airplane, possibly at a higher number... this can leave the buyer in a very weak position, especially at the end of the year when putting an airplane into service is required for tax purposes.

I point out in the turbine world, because that's what I am familiar with, I hear things are similar in the piston markets... but it's probably been ten years since I've sold a piston airplane, so I don't really have a feel for what it is like to buy a Bonanza or a 182.. most of what I know about those markets these days, I read on here.
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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 17:09 
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Username Protected wrote:
This kinda implies that Sellers are evil. And because most Buyers are also Sellers (or eventually will be), how can one explain the bi-polar nature here?

Best,

Tom


So many buyers a seller renegs on a binding offer and returns deposit? Takes higher offer from other buyer and leaves buyer high and dry

There are ways to protect for this in the purchase agreement language that should not be required but in a hot sellers market may be necessitated

I dealt with a seller that would keep moving the goal post, over 18 months later he is still stuck with the plane and now hiring a broker to get his magic number, good luck!


Exactly!!
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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 17:14 
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Several people have pointed out that it is not a seller's market, that can be true.

There's no such thing as it being a seller's market across the board, as I've mentioned before, the aircraft market is really a collection of micro-markets. I can promise you that if you're trying to buy a CJ2, 2+ or CJ3, an Encore, Excel or XLS... you are well aware that it is a seller's market.

Some other markets are "settled" meaning that there are very few buyers and very few motivated sellers. Piaggios, Conquest, MU-2's are all fairly settled. The folks that have the airplanes love them and aren't really interested in selling.

Want to buy a Lear 35A, Lear 60, a Westwind II... not a seller's market!

I just had a call yesterday from a guy who wants to buy a C90B with Blackhawks, he said he and his son have been trying for months, they'll call on an airplane and if the broker calls them back at all it's to say it is already sold. He'll probably hire us and we'll certainly find him an airplane, but it may take three to six months when it use to take 30 days.

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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 19:09 
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Username Protected wrote:
Several people have pointed out that it is not a seller's market, that can be true.

There's no such thing as it being a seller's market across the board, as I've mentioned before, the aircraft market is really a collection of micro-markets. I can promise you that if you're trying to buy a CJ2, 2+ or CJ3, an Encore, Excel or XLS... you are well aware that it is a seller's market.

Some other markets are "settled" meaning that there are very few buyers and very few motivated sellers. Piaggios, Conquest, MU-2's are all fairly settled. The folks that have the airplanes love them and aren't really interested in selling.

Want to buy a Lear 35A, Lear 60, a Westwind II... not a seller's market!

I just had a call yesterday from a guy who wants to buy a C90B with Blackhawks, he said he and his son have been trying for months, they'll call on an airplane and if the broker calls them back at all it's to say it is already sold. He'll probably hire us and we'll certainly find him an airplane, but it may take three to six months when it use to take 30 days.



Chip, how much if this is supply constraints? I would guess that production of new aircraft was down last year due to COVID-19 and manufacturing shutdowns. But GAMA data fir full year not out yet.


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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 19:57 
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Username Protected wrote:
Several people have pointed out that it is not a seller's market, that can be true.

There's no such thing as it being a seller's market across the board, as I've mentioned before, the aircraft market is really a collection of micro-markets. I can promise you that if you're trying to buy a CJ2, 2+ or CJ3, an Encore, Excel or XLS... you are well aware that it is a seller's market.

Some other markets are "settled" meaning that there are very few buyers and very few motivated sellers. Piaggios, Conquest, MU-2's are all fairly settled. The folks that have the airplanes love them and aren't really interested in selling.

Want to buy a Lear 35A, Lear 60, a Westwind II... not a seller's market!

I just had a call yesterday from a guy who wants to buy a C90B with Blackhawks, he said he and his son have been trying for months, they'll call on an airplane and if the broker calls them back at all it's to say it is already sold. He'll probably hire us and we'll certainly find him an airplane, but it may take three to six months when it use to take 30 days.



Chip, how much if this is supply constraints? I would guess that production of new aircraft was down last year due to COVID-19 and manufacturing shutdowns. But GAMA data fir full year not out yet.


That's a good question, looking at it from the bottom up and using the 560 series as an example, I can say that it's hard to find a nice Citation V, because the Ultra market got thin and Ultra buyers settled for a V... and part of the reason the Ultra market got tight is because of the Encore market... made tight by the Excel market and people settling for the Encore+ because they couldn't find an Excel... and of course that is because of the XLS market... having said that the softness seems to be in the later model XLS+'s

I haven't looked at new units sold, I get info quicker than GAMA puts it out, but it could be a factor. I think the biggest thing is we've just had several years of robust sales. Once someone buys an airplane they usually hang on to it for 3 - 5 years... so when you have a surge of activity that translates to low inventory numbers for a while.
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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 10 Jan 2021, 22:20 
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Username Protected wrote:
The way you succeed in a seller's market is to accept risk.

Everything you read about how to buy an airplane involves a slow, laborious process that is fraught with risk and labor for the seller. First you want to review the logbooks that you ask the seller to scan, then you make an offer with 16 different ways for you to get out of the deal, and there's an escrow servive and a title search then you schedule a pre-buy 3 weeks out someplace 200 miles from the homebase (because you want an independent mechanic and someone with a reputation for knowing the airplane) then you get a squawk list with 84 items on it and hem and haw about whether the seller is going to fix all of these items, 72 of which you would try to talk your own mechanic out of at the next annual. And the point of all this is to presumably get an airplane that will serve you well at minimal cost and - perhaps most importantly - minimal surprises.

But the truth is airplane ownership is full of surprises and they just start when you buy the plane. The way you survive in a seller's market is to quickly focus on the big gotchas that can be rapidly and objectively determined (eg complete logbooks) and accept that you cannot string out the deal for 3 months futilely trying to eliminate all risk to the purchase.

You're going to take some calculated risks. Say you have a bonanza with 10 year old paint, 1 year old glass panel and a 1200SMOH engine installed 8 years ago. That indicates an involved seller. That airplane is likely to be a good airplane. If you want it, go give the man a $5,000 deposit and close the deal within a week. Bring your mechanic to look at the logs and maybe cut an oil filter open.


Sellers market or buyers market, this is good advice. The best planes are never listed because buyers, despite the whims of the economy, are oogling them. Got both my current A36 and my C206 this way.

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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 11 Jan 2021, 13:32 
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Username Protected wrote:
The way you succeed in a seller's market is to accept risk.

Everything you read about how to buy an airplane involves a slow, laborious process that is fraught with risk and labor for the seller. First you want to review the logbooks that you ask the seller to scan, then you make an offer with 16 different ways for you to get out of the deal, and there's an escrow servive and a title search then you schedule a pre-buy 3 weeks out someplace 200 miles from the homebase (because you want an independent mechanic and someone with a reputation for knowing the airplane) then you get a squawk list with 84 items on it and hem and haw about whether the seller is going to fix all of these items, 72 of which you would try to talk your own mechanic out of at the next annual. And the point of all this is to presumably get an airplane that will serve you well at minimal cost and - perhaps most importantly - minimal surprises.

But the truth is airplane ownership is full of surprises and they just start when you buy the plane. The way you survive in a seller's market is to quickly focus on the big gotchas that can be rapidly and objectively determined (eg complete logbooks) and accept that you cannot string out the deal for 3 months futilely trying to eliminate all risk to the purchase.

You're going to take some calculated risks. Say you have a bonanza with 10 year old paint, 1 year old glass panel and a 1200SMOH engine installed 8 years ago. That indicates an involved seller. That airplane is likely to be a good airplane. If you want it, go give the man a $5,000 deposit and close the deal within a week. Bring your mechanic to look at the logs and maybe cut an oil filter open.


Sellers market or buyers market, this is good advice. The best planes are never listed because buyers, despite the whims of the economy, are oogling them. Got both my current A36 and my C206 this way.


Exactly right.....I’m about to close on my third airplane pretty much this way. The D55 I’m getting this month never even hit the traditional venues.

My prior purchases (as with this one) were the same and worked out great. Dealing with upfront and honest owners, check out the logs, talk to those that have maintained the aircraft (and the shop’s reputation), eyeball the airplane. From that point forward have an honest conversation with yourself and realize in most cases we’re buying older airplanes, write a check, shake hands, close the deal. Done.

Last edited on 11 Jan 2021, 16:03, edited 1 time in total.

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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 11 Jan 2021, 15:51 
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Yes but you can easily delete that text and replace it with something else, which is what I do. Demonstrates real interest, versus responding to an ad for sport


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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 11 Jan 2021, 15:55 
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Well I’m looking for a PA32 (non turbo) if anyone knows of any off-market ones


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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 15 Jan 2021, 16:47 
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Not that I would, but if you HAD to do your own pre-buy, would ya? Still shopping for my next Bonanza... any leads on a nice S- or V35 would be great!
[youtube]https://youtu.be/FhvSynnrDdw[/youtube]

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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 27 Jan 2021, 13:20 
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It is true that it's not hard to figure it out, but it's the unknowns that get you. I learn something new about buying airplanes on a regular basis... even though it's all I do.

[/quote] I get accused of promoting myself, but if you look at what I have posted over the last five years, what I am really promoting is aircraft buyers doing whatever they need to do to keep from getting screwed. In some cases that means carry on the way you always have, in other cases that means hire someone. There's no one size fits all solution.

My goal is to share knowledge, my business is to buy airplanes, I use the knowledge in my business, but that is not the product. The product is finding off market airplanes and doing all of the work to understand the market and get an airplane bought right, inspected right and put into operation.

The finding airplanes part is almost impossible if you don't have the tools and contacts. The second part is people (time) and process (knowledge). Without the tools, knowledge and time to do it right, many choose to hire someone else. I can work on my own vehicles, I even like it... I have the tools and the knowledge... but I don't have the time.

No matter what, acquire the knowledge, this forum is full of knowledge, I am a phone call away. I won't charge you a dime for the guidance and you have no reason to feel guilty about that, the goal is to eliminate as many of the unknowns as possible. I've met very few aircraft buyers that were poor decision makers, but you have to have good information to make good decisions.[/quote]

:rock:
I've been lurking and reading every thread about buying an airplane, threads on every Brand-X
What I've learned by going to Controller is that I need help.

After reading these threads...and btw....best aviation board there is. COPA is a bit busier, but seems to be a lot of K....I.........Alls.......I'm going to be reaching out to Chip for help!


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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 28 Jan 2021, 00:51 
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Ask the former BT nemesis. I heard he knows how to buy and airplane in a sellers
market !

Or maybe he just succumbed the power of the “Great ONE” :thumbup:

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 Post subject: Re: How to buy an airplane in a seller's market.
PostPosted: 28 Jan 2021, 12:21 
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Username Protected wrote:
Ask the former BT nemesis. I heard he knows how to buy and airplane in a sellers
market !


so what is ben p’s number?


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